Posts Tagged ‘economic crisis’

What Small Businesses Did Right in 2008

Wednesday, December 31st, 2008

The news bulletins of 2008 became one relentless reminder of the economic crisis. They reported that businesses and industries suffered, under the great weights of declining sales and a wounded morale.

But the year also taught some valuable lessons, especially to small business owners. Whatever losses they suffered the public noticed, which made their successes all the more notable:

• What they could not compensate in price, they made up for with customer service. Take note of Kelly Spors, small-business writer for the Wall Street Journal, and her recent experience buying trout at her neighborhood fish and meat market:
  “Rather than just ringing me up, the man behind the counter spent 10 minutes energetically explaining to me his favorite way to season and broil it,” she wrote. “He obviously knew a lot about the fish and meats he was selling, and it turned out delicious. I know where I’ll go next time I want fish – and it won’t be a major grocery chain.
• They sought alternative means of credit as their usual sources dried up. Local, community banks became more viable options. There, commercial and industrial lending continued to rise throughout the year, amounting up to $1.24 billion in November, according to the Federal Reserve.
  Credit unions also became a reasonable source of lending. The Credit Union National Association predicted that, with their conservative practices, they should see savings and loans growth this year and into next year.
• They lent to a growing online retail environment. And, considering this year’s growth, 60 percent of small and medium-sized businesses could have a Web site by 2010, according to Kelsey Group, a search and directory research firm. About 33 percent of them have a Web site today.
  Internet design and marketing companies catering to small and medium-sized businesses also took notice. Web.com saw its number of subscribers more than double over the past year, from 82,000 to about 274,000.

What else did small businesses do right in 2008?

Tags: business credit, christina lee, Credit Union National Association, customer service, economic crisis, Kelly Spors, online marketing, Web.com
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Save the Date: 2009 Economic Forecast for Wholesale Distribution

Monday, November 3rd, 2008

Despite the weak economic environment, the wholesale distribution industry may see over the next eight months a 14.0 percent rise in revenue. But within that growth, Dr. Adam Fein also foresees the most variation between sectors that has been seen in five years.

Such predictions, plus an overall unfavorable outlook of next year, will shape Fein’s “2009 Economic Forecast for Wholesale Distribution” Webcast. On November 13, he invites industry executives and others to hear his macroeconomic and business-to-business outlooks, while also addressing the futures of 19 wholesale-distribution sectors.

Fein is the founder and president of Pembroke Consulting, a management advisory and business research firm. He also serves as the first fellow for the National Association of Wholesaler-Distributors.

The Webcast, airing at 2 p.m. Eastern Standard Time, costs $79 for registration and a complimentary written report. For more information, call 303-443-5060 or visit www.mdm.com/2009forecast.

Tags: Adam Fein, christina lee, economic crisis, National Association of Wholesaler-Distributors, Pembroke Consulting, webcast
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Q&A: How Will the Bailout Plan Affect Wholesalers?

Thursday, October 23rd, 2008

Q: How will the bailout plan affect wholesalers?

A: Financial suffering is bound to trickle down the supply chain because of unstable credit conditions. As a result, “many wholesale distributors will be affected by the government’s efforts to stabilize the credit markets,” said Brent Grover, managing partner at Evergreen Consulting and National Association of Wholesaler-Distributors author (“Official Guide to Wholesaler-Distributor Success”).

The extent of that effect depends upon how quickly the government can stabilize the banking system. Because of economic times like these, the bailout plan – or, the Emergency Economic Stabilization Act of 2008 – implemented discount rates to the costs of both purchasing and insuring troubled financial institutions, as once defined by the Federal Credit Reform Act of 1990.

Distributors typically have two primary sources of financing: supplier credit, or how much self-financing goes into company operations; and bank credit, or how much a company borrows through either credits or loans. A typical distribution business usually borrows 30 to 60 percent of its capital, or total amount of financial resources available, according to Grover.

Such a business still has to consider then how interest rates can rise and how the availability of credit can fall. For a distributor, weakened suppliers and apprehensive customers “can be dangerous to deal with,” Grover said, for all can suffer from decreases in sales and profits.

With this, highly-leveraged companies – or those with a heavy use of bank credit – may also struggle to make regular payments back to banks. Add struggling banks into that relationship, and “the problem is exacerbated,” Grover said.

In sum, “the government’s efforts to stabilize the banking system, if successful, will bring a great deal of relief to the customers of those banks,” as Grover said.

Of course, how quickly these efforts will be made has yet to be determined. But with the determination amongst the administration and Congress, as the Wall Street Journal’s David Stout wrote last month, “while a couple of venerable investment banks could fade into oblivion or be absorbed by mergers, the entire financial system could not be allowed to collapse.”

Tags: bailout plan, Brent Grover, christina lee, economic crisis, Emergency Economic Stablization Act of 2008, Evergreen Consulting, National Association of Wholesaler-Distributors, wholesale distribution
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Wholesale-Distribution and the Economic Crisis

Saturday, October 11th, 2008

Each day this week, Wall Street investors watched in astonishment as the Dow Jones Industrial Average plummeted at unprecedented rates. Very few, if any segments in the wholesale-distribution industry are safe, experts say — but every day that passes is an opportunity to optimize the market.

“What it comes down to is making the best strategic decision, under any circumstances,” said Chuck Miller, vice-president of marketing communications firm CommCentric Solutions, “and when you have fast-changing conditions that occur with the challenges of today, you have to be able to respond quickly and appropriately.”

The most recommended solution in times like these: collaboration that pushes down barriers of competition. That competition, according to Richard Sherman, refers to manufacturers and retailers, “not necessarily other wholesalers down the street.”

But while initiating these new relationships, wholesale-distributors of all sorts must make sure that they add value to their services and make that value known — starting now.

“They need to wake up,” said Sherman, president of Gold and Domas Research and supply chain management expert. “In fact, I happen to be working with some wholesaler segments — and I won’t say which ones — that don’t need a wake-up call. They need a wake-up two-by-four.”

The Market’s Current State

According to research by the Manufacturers Alliance , manufacturing production growth is expected to decline by 0.5 percent in 2008, following a low 1.7 percent growth last year. Its research institute does expect growth in 2009, but only by 0.2 percent.

The only growth expected this year is in investment in equipment and software — by 0.8 percent in 2008 and 2.3 percent in 2009. In addition, the research institute predicts that the largest percentage gain in capital equipment spending will go toward the high-tech sectors.

“Distributors in the IT industry have an advantage in such circumstances. In tougher times, everyone wants to cut costs and find ways to be more efficient,” Miller said.

But, as the former communications director of Tech Data Corporation — one of the world’s largest technology product distributors — can attest, the advantage that the industry has is no guarantee.

“It is very difficult to see how everything will unfold,” he said. “It is contingent on the actions of the Fed, and how that overall affects the business climate. That obviously affects IT spending and how much stability or how much decline may occur.”

Ben Worthen, a Wall Street Journal blogger, also announced to readers Tuesday that “The Tech Sector Finally Gets Hit.” His entry discussed the loss in revenue by SAP and RightNow Technologies — proof, he says, that “tech companies may have cash, but their customers aren’t so lucky.”

Wholesale-distribution experts expect very little, if any segments of the industry to remain intact.

“The wholesale-distribution industry as a whole is going to be impacted in a very general way as is the economy — which is pretty devastating,” said Jim Olsztynski, editor of plumbing distribution magazine Supply House Times. “We all see what is happening to the stock market, and everything else that is going on. I think we’d be whistling in the dark if you think the wholesale industry is going to prosper.”

Past Sufferings

Wall Street only presents the latest of obstacles the wholesale-distribution industry has had in over the past ten years. More than 20 years ago, manufacturers and retailers began making efforts to distribute goods themselves — a process that cut out wholesale-distributors and, as they thought at the time, reduced both costs and risks.

Beginning in 2000, layoffs in the technology distribution industry came as a result from, as Miller described, “a combination of the dot-com explosion and large-scale build-up for the Y2K conversion.” Dell became renowned for its direct-model approach — the manufacturer’s unique way of adverting the industry’s downturn.

In the end, manufacturers and retailers did not reduce either cost or risk by much, according to Sherman. Still, they saw wholesale-distributors as little more than “middlemen” that had to prove themselves worthy again

“Mr. Wholesaler, you have to begin to articulate the value of those services and value of inventory management, and buffering risk against uncertainty in the last mile of that distribution,” he said, to sum up his advice given in a 2001 Material Handling Management article, “Wholesale Distribution — Back in the Chain Game.”

Part of this redefinition, as wholesaler-distributors found, became the creation of a new relationship with manufacturers and retailers. They began providing extra packaging lines so that they could send out personalized case sizes of material — thus, reducing costs manufacturers had to pay for packaging material, labor, and equipment.

How Crisis Becomes an Opportunity

A reexamination of history — in particular, when distributors were being overlooked ten years ago — could lend solutions for today’s crisis. More than ever, wholesale-distributors need to learn fast how to deal with an increased crunch in and competition for cash flow, credit and capital.

With this, “the bigger businesses are going to get bigger, the smaller businesses are going to get smarter, and the medium-sized businesses got to really look at their strategic intent,” as Sherman said.

One of the first steps wholesale-distributors must take is to evaluate their inventories.

“A lot of capital gets tied up in those inventories,” Sherman said. “Managing inventory in light of tight credit is an opportunity to free up working capital.”

In addition, as they had to do ten years ago, wholesale-distributors must again add value to their services and collaborate with manufacturers and retailers. Experts advise that distributors offer to take care of supplying to regional retailers or to other small to mid-sized clients, so that manufacturers can focus more on their national buyers.

“It’s the wholesaler that has to educate their former supplier or other suppliers of the capabilities they bring to the table,” Sherman said.

As he has already seen in the technology distribution industry, Miller says that reimplementation of two-tiered business — and with that, “solution selling” — in other industries will soon prove to be more cost-effective.

“The solutions that are used by all businesses, large and small, are comprised of multiple products. The single vendor providing direct sales doesn’t have that solution that the all-products-in-one-place has,” he said. “This is a very significant plus that has always been there for distributors and is even more pronounced during tough times.”

Regardless of what steps distributors decide to take, experts agree as well that the current financial situation will surely lend lessons of its own.

“A lot of people don’t realize how interconnected business really is,” Sherman said. “For those people who don’t think that their business is in an ecosystem, and that a little bump here could cause a big bump somewhere else: this should be a real education opportunity.”

Tags: christina lee, Chuck Miller, CommCentric Solutions, economic crisis, economic downturn, Gold and Domas Research, Jim Olsztynski, manufacturers, retailers, Richard Sherman, Supply House Times, wholesale distribution
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How Are Small Businesses REALLY Doing?

Wednesday, October 8th, 2008

Q: Are small businesses really having a hard time right now? Everything seems OK to me. Sure, gas prices are higher, but all in all, things are fine.

Phil

A: I’m sorry, but I simply disagree. I think things are pretty tough right now for most small businesses. That said, nevertheless, I will admit that there is a surprising amount of debate on this issue.
Case in point: I hosted a roundtable event of small business bloggers in New York last week. The event was sponsored by Brother and the topic was, "Who says a slow economy has to slow your small business down?"

I thought that "the slow economy" was a given and was prepared to move the discussion on from that point, so you can imagine my surprise when the very premise of our chat was challenged by not one, but several of the bloggers in attendance.

Their point? That the people they work with, and the ones who read their blogs, and the small business people they know, are doing just fine, thank you very much. Phil Graham was right, one asserted, we are nothing but a nation of whiners and the whole problem with any alleged economic slowdown is that it was fabricated out of whole cloth by the media.

You gotta be kidding me!

There is no doubt that $4 a gallon gas, inflation generally, deflated home prices, and the credit crunch are making it substantially harder for small businesses these days. That there was such strong opposition to that point of view really surprised me.

What didn’t surprise me, though, was that there was also some general disagreement about whether and to what extent small businesses can benefit from new media tools like websites and blogs.

For example, does a gas station need a blog? Does it even need a website? One friend of mine who attended the event thought not, stating that the gas station gets its business via drive-by traffic. Who would bother even checking out the station’s site, let alone its blog?

But I think that is being shortsighted.

Look, amigos, we are living in a brave, new digital age. Hop on the bus, or it will pass you by. No matter what the newest tool is, there is no doubt that a plethora of exciting, new options are available today to help you succeed in business.

What if the gas station had on its main sign something like, "Check out our website - GasSavers.com to download free coupons for 3 cents off per gallon!" Don’t you think that would drive some people to the site? And, aside from the coupon, what if the station then had other specials advertised on its site? What if it had a drawing for a free tank of gas for customers who fill up four or more times this month? Would that not create an even more loyal customer base, and generate even more business?

I have a pal whose e-newsletter is vital to his business, and his business has to do with cars. One colleague uses free e-books to generate 60% of his new business.

This is the beauty of new media. Whether it is your site, your e-newsletter, a viral video, a blog, or whatever, all of these tools work together to create a multitude of new ways to attract new customers, sell more, and market better - inexpensively and powerfully. Even in this economy.

Hop on the bus, Gus!

Today’s Tip: Another way to ensure that you succeed in this tough economy is by keeping your overhead low. This is the very first piece of advice I ever received before I started my first business and is still among the best.
I was reminded of this at the event when I saw a new Brother Professional Series all-in-one inkjet printer on display. The cool thing was that it printed 11×17 pages - in color. That alone could eliminate a trip to Kinko’s for a lot of businesses - for brochures, displays, whatever. Keep your overhead low!

Need a speaker for your next event? Contact Steve ! He is one of the world’s leading business experts, a popular speaker on the business lecture circuit, and is sure to leave any audience thrilled. A columnist for USA TODAY, lawyer and author, his latest book is the best-selling Small Business Bible : Everything You Need to Know to Succeed in Your Small Business . You can sign up today for his free newsletter , "Small Business Success Secrets!" at his web site - www.MrAllBiz.com .

Tags: advice, column, economic crisis, economy, small business, small business expert, Steve Strauss
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Helping Customers Weather Recession

Friday, May 23rd, 2008

The following is a great excerpt from an article on Forbes.com . It highlights some strategies retailers can use to help get themselves and their customers through the economic storm:

"In the short-term, retailers need to continue providing sales incentives, discounts and promotions that demonstrate value to the consumer. Incentive packages can be offered for cost-saving items such as fuel-efficient cars or energy-saving light bulbs. Innovative ideas to help consumers spend "extra" money will be critical. We have seen this happen already in the travel industry where some resorts are providing gas cards for guests driving to the destination.

Retailers with a strong, customer-oriented Internet presence are well positioned to take advantage of the momentum in Internet sales carried over from the 2007 holiday season. Retailers should explore new payment options for customers for online sales, including prepaid gift cards, which would have the added benefit of capitalizing on the increase of customers buying gift cards. Ultimately, e-commerce will help consumers save gas money while having the associated benefit of lower operating costs for the retailer.

Looking ahead to long-term positioning, retailers can improve return on investment for their stores by taking advantage of lower retail space costs for new store openings. With companies halting store expansion and announcing store closings, certain regions have experienced an excess of retail space. The industry should capitalize on better lease terms than we have seen in recent periods.

As mid-range and long-term strategies, retailers will need to focus on properly managing the mix and quantity of inventory held in their stores and distribution centers. In conjunction with maintaining inventory, retailers should seek alternative channels, such as the use of distributors or value-added resellers in lieu of a retailers’ clearance center approach.

Retailers will also be forced to reassess their suppliers and transportation, as well as storage and handling costs, as product costs from overseas, particularly China, continue to increase.

In the end, the U.S. economy is built on both consumer spending power and retail success. If retailers remain determined to help consumers weather this difficult time while bracing themselves accordingly, we can all hope to emerge strong in 2009."

Happy Memorial Day Weekend!

Tags: economic crisis, economic downturn, Generating More Sales, Rebecca Button, recession, Sales
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Tips for Surviving the Slow Down

Thursday, February 21st, 2008

Small businesses are some of the most affected by economic downturns. While these practices can and should be implemented during times of prosperity as well, they will help businesses survive during a recession.

Get involved: Don’t just join local organizations and charities–get on the committee board! This not only will help you stand out and make a name for yourself, but it will also get you meeting and working with more people. Also always keep in mind that strangers you strike up conversations with at the grocery store or fellow parents at a PTA meeting can be new customers/clients. It’s good old fashioned networking.

Reach out to existing clients: These are people you already know need your goods and/or services. Chances are they like doing business with you and are willing to do more if you take the time to think of new ways to serve their needs. If you can’t think of anything yourself, call them up and ask.

Do NOT cut your marketing budget: You need to market yourself more than ever when consumers are shy about where they are spending their money. You are competing even harder to make the sale over other competitors so you need to reinforce your brand, products and services as things people still need, despite the economic downs.

Offer a special service or discount: It may seem counter intuitive to charge less when you need to be making more, but this tactic will get people buying and let’s face it, customers buying at a discount are better than no customers at all. Also a little extra customer service should cost little to nothing at all and the benefits could be very important to keeping your business afloat.

Tags: Accounting, economic crisis, economic downturn, economy, Finance, Finance and Accounting, Generating More Sales, Rebecca Button, recession
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